Paying for long-term care
As we learned in last week’s, the cost of custodial care in Aiken is about $5,000 per month for a private room in a nice nursing home and between $20-$25 a day for in-home care. If you and your spouse, or you alone if you are single, have determined that you do not possess the financial wherewithal to pay those costs out of your current assets, what are your choices?
First, are you eligible of Medicaid? In South Carolina, a single person cannot have income greater than $2,313 per month nor own assets greater than $2,000. Non-countable assets include personal possessions including clothing and jewelry, household furnishings, one vehicle, $1,500 set aside for funeral expenses, modest life insurance cash values and a residence in which the equity is less than $585,000 this year. If you are married and only one spouse is applying, the asset limit for the applying spouse is $2,000, but is $66,480 for the other spouse. Moreover, the non-applicant spouse may have monthly income of as much as $3,161 as a community spouse income allowance. If you are 70 or older, RMD’s are included in income.
If the married couple qualifies on the asset front, but has income that is over the limit, but not enough to cover the long- term care expenses, there is another option known as the qualified income trust. The income that is over the Medicaid cap is deposited into this trust, and a trustee is named, giving that person legal control of the trust assets. This trust is irrevocable, and the State of S.C. must be named the remainder beneficiary.
Knowledgeable financial planners and elder care attorneys can help with Medicaid planning.
If you can absorb a portion of the expense, then you only need only look elsewhere for the portion you cannot cover. One potentially attractive choice might be a home equity loan. The interest on that loan is no longer deductible, but the cost of the custodial care is a legitimate medical expense and, thus, deductible as an itemized deduction. If your AGI were $60,000, those long-term care costs that exceeded $6,000 in a year would be deductible.
If you will not be able to repay the Home Equity Loan, then you may want to consider a reverse mortgage that generates enough monthly revenue to pay for your short fall.
Other sources of financial help might be children who are able to provide financial assistance. Better this approach for them than possibly having to become an unpaid caregiver to a parent who needs custodial care.
The final option is to bite the bullet and purchase some type of insurance product to cover all or a portion of the expense.
I examined two different funding approaches from a top-rated carrier. The first was the purchase of a traditional long-term care policy for both hubby and spouse, assuming each were age 60. Using a 90-day waiting period (the time that you must have qualified and paid the expenses yourself); a $150 per day benefit without any percent increase in that benefit; and a payout period of up to three years for hubby and four years for the spouse, the premium for both was $5,553. The maximum issue age for this company was age 65, by the way. The premium at that age was almost $10,000 annually.
The downside to a traditional policy is that if you die without using the benefit, you forfeit the premiums you paid (but that is the case with auto and homeowner’s insurance as well, and we still purchase those coverages).
A second approach might be to purchase a single premium life insurance policy with a long-term care rider. A $50,000 single premium for a 60-year-old female in average health generates an immediate monthly LTC benefit of $2,792 to be paid over four years. The initial death benefit would be $67,000, slowly rising to $101,000 at age 80. Better still, the surrender value would rise from $44,000 initially to $58,00 at age 80. All those policy values would continue to grow over time. By GREG ROBERTS On the Money